A year after Annex Theatre built its new stage at the Capitol Hill Arts Center, it's probably moving out. Difficult lease negotiations with CHAC, including a 31.25 percent rent increase and conflicts over sound bleed from CHAC's new nightclub events, have forced Annex to look for a new home, says Annex managing director Stephen McCandless. The company hopes to come to a final decision in the next two weeks.

McCandless chose his words carefully: "The prospect of leaving CHAC has not been met with unblemished magnanimousness."

Annex, a 20-year-old company, was itinerant from 2001 to 2006, but in that time produced over 20 plays (and a monthly cabaret). When the opportunity came to renovate and move into an upstairs corner of CHAC, Annex pounced. The company raised $40,000 (including $10,000 from 4Culture, King County's arts fund) and organized volunteer labor to scrounge, haul, and build. If Annex walks away, CHAC, a for-profit arts center, absorbs the benefits of those donations.

When Annex moved in, CHAC was mostly a theater venue, and both parties agreed to quiet hours (no amplified sound, no loud music) so that theater companies in all CHAC's spaces (the main stage, the Lower Level, and Annex's space, the Stellner Studio) could rehearse and perform uninterrupted.

In January, CHAC began hosting Blacklight, a weekend goth dance night, on its main stage. In exchange for a rent discount, Annex waived its right to complain about sound problems from the main stage and ran shows on Tuesdays and Wednesdays. "If we had a show that took place in a club bathroom, we'd totally produce that on the weekend," said Annex artistic director Gillian Jorgensen. Problems persisted.

Example: Annex had to postpone the closing night of its current production (The Secret Recordings of Lenin...) due to a DJ battle scheduled that Wednesday, which Annex found out about when a company member saw it listed on CHAC's website, McCandless said. "CHAC found a way to earn more income and it definitely isn't theater," he added. (Other performers who've worked with CHAC, like Stephen Hando of Printers Devil Theatre and Xavier Frost of Pure Cirkus, say, respectively, that communication at CHAC "isn't great" and "sucks.")

Other sticking points on the lease include the 31.25 percent rent increase (which, CHAC director Matthew Kwatinetz says, matches CHAC's rent increase) and control over when and how Annex gets to use the Elizabeth Stetson gallery, which is also Annex's lobby.

"This is standard lease negotiation," said Kwatinetz. "They're looking at their options, as I would encourage anybody to."

Annex is looking at three alternate spaces. They didn't disclose two. The third is Washington Hall at 14th Avenue and East Fir Street in the Central District, the old home of On the Boards and a music venue where Billie Holiday, Duke Ellington, and Lionel Hampton performed. Currently owned by a Masonic lodge called the Sons of Haiti, Washington Hall has offers to buy from developers.

Kwatinetz said that CHAC, founded in 2002, has not yet turned a profit.